Somali - SDB Project : Credit 0698 - Project Agreement - Conformed

CONFORMED COPY CREDIT NUMBER 698 SO PROJECT AGREEMENT (SDB Project) between INTERNATIONAL DEVELOPMENT ASSOCIATION and SOMALI DEVELOPMENT BANK Dated June 1, 1977 PROJECT AGREEMENT AGREEMENT, dated June 1, 1977, between INTERNATIONAL DEVELOP- MENT ASSOCIATION (hereinafter called the Association) and SOMALI DEVELOPMENT BANK (hereinafter called SDB). WHEREAS by the Development Credit Agreement of even date herewith between the Somali Democratic Republic (hereinafter called the Borrower) and the Association, the Association has agreed to make available to the Borrower an amount in various currencies equivalent to five million dollars ($5,000,000), on the terms and conditions set forth in the Development Credit Agreement, but only on condition that SDB agree to undertake such obligations toward the Association as hereinafter set forth; WHEREAS by a subsidiary loan agreement to be entered into between the Borrower and SDB, the proceeds of the credit provided for under the Development Credit Agreement will be made available to SDB on the terms and conditions therein set forth; WHEREAS the Borrower intends to contract from the Arab Fund for Economic and Social Development a grant in an amount of 100,000 Kuwaiti Dinars equivalent to about $340,000 to be made available to SDB to assist in financing Parts B (i), B (iii) and B (v) of the Project described in Schedule 1 to the Development Credit Agreement on the terms and conditions set forth in an agreement to be entered into between the Borrower and the Arab Fund; and -2- WHEREAS SDB, in consideration of the Association's entering into the Development Credit Agreement with the Borrower, has agreed to undertake the obligations hereinafter set forth; NOW THEREFORE the parties hereto hereby agree as follows: -3- ARTICLE I Definitions Section 1.01. Wherever used in this Agreement, unless the context shall otherwise require, the several terms defined in the Development Credit Agreement and in the General Conditions (as so defined) have the respective meanings therein set forth. -4- ARTICLE II Execution of the Project Section 2.01. SDB shall carry out the Project described in Schedule 1 to the Development Credit Agreement and shall conduct its operations and affairs with due diligence and efficiency and in conformity with appropriate administrative, economic, financial and investment standards and practices, with qualified and experienced management and personnel, and in accordance with the SDB Law and the By-laws. Section 2.02. In order to assist SDB in the carrying out of Parts B (ii) and B (iv) of the Project, SDB shall employ experts whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Association. Section 2.03. (a) In accordance with and subject to the provisions of the Development Credit Agreement, SDB shall submit Investment Projects to the Association for approval or for authorization of withdrawals from the Credit Account. (b) When presenting a sub-loan (other than a free-limit sub-loan) or an investment to the Association for approval, SDB shall furnish to the Association an application, in form satisfactory to the Association, together with (i) a description of the Investment Enterprise and an appraisal of the Investment Project to be financed under such sub-loan or investment, - 5 - including a description of the expenditures for such Investment Project proposed to be financed out of the proceeds of the Credit relent to SDB under the Subsidiary Loan Agreement; (ii) the proposed terms and conditions of the sub-loan or investment, including the schedule of amortization of the sub-loan or of repayment to the Borrower of the amount to be used for the investment; and (iii) such other information as the Association shall reasonably request. (c) Each request by SDB for authorization to make withdrawals from the Credit Account in respect of a free-limit sub-loan shall contain (i) a summary description of the Investment Enterprise and the Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Credit relent to SDB under the Subsidiary Loan Agreement; and (ii) the terms and conditions of such free-limit sub-loan, including the schedule of amortization therefor. (d) The amortization schedule applicable to each sub-loan and the schedule of repayment to SDB in respect of each investment shall provide for an appropriate period of grace, and, unless the Association and SDB shall otherwise agree (i) shall not extend beyond fifteen years from the date of approval by the Association of such sub-loan or investment, or in the case of a free-limit sub-loan, of authorization by the Association to make withdrawals from the Credit Account in respect thereof; and (ii) - 6 - shall provide for approximately equal semi-annual, or more frequent, aggregate payments of principal and interest or approximately equal semi-annual, or more frequent, payments of principal. (e) SDB shall not, without consultation with the Association, make any substantial changes in respect of the repayment provisions of any sub-loan. (f) Except as the Association and SDB shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (b) and (c) of this Section shall be presented to the Association on or before June 30, 1979. Section 2.04. SDB undertakes that, unless the Association shall otherwise agree, any sub-loan shall be made on terms which shall provide, inter alia, that interest to be paid by the Investment Enterprise shall be not less than: (i) five and one-half percent (5-1/2%) per annum on the outstanding balance of medium-term sub-loan and six percent (6%) per annum on the outstanding balance of long-term sub-loan, in the case of such sub-loans to agricultural and handicraft Investment Enterprises; and - 7 - (ii) seven and one-half percent (7-1/2%) per annum on the outstanding balance of the sub-loan in the case of sub-loans to industrial Investment Enterprises and for all other sub-loans. Section 2.05. (a) SDB undertakes that, unless the Association shall otherwise agree, any sub-loan or investment will be made on terms whereby SDB shall obtain, by written contract with the Investment Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Association and SDB, including, in the case of any sub-loan and to the extent that it shall be appropriate in the case of any investment, the right of SDB to: (i) require the Investment Enterprise to carry out and operate the Investment Project with due diligence and efficiency and in accordance with appropriate technical, financial and managerial standards and to maintain adequate records; (ii) require that: (1) the goods and services to be financed out of the proceeds of the Credit shall be purchased at a reasonable price, account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities - 8 - and spare parts therefor, and, in the case of services, of their quality and the competence of the parties rendering them; and (2) such goods and services shall be used exclusively in the carrying out of the Investment Project; (iii) inspect, by itself or jointly with representatives of the Association if the Association shall so request, such goods and the sites, works, plants and construction included in the Investment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the Investment Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with appropriate business practice; and (2) without any limitation upon the foregoing, such insurance shall cover hazards incident to the acquisition, transportation and delivery of goods financed out of the proceeds of the Credit to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the Investment Enterprise to replace or repair such goods; - 9 - (v) obtain all such information as the Association or the Borrower shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the Investment Enterprise; and (vi) suspend or terminate the right of the Investment Enterprise to the use of the proceeds of the Credit upon failure by such Investment Enterprise to perform its obligations under its contract with SDB. (b) SDB shall exercise its rights in relation to each Investment Project in such manner as to: (i) protect the interests of the Association and SDB; (ii) comply with its obligations under this Agreement; and (iii) achieve the purposes of the Project. Section 2.06. (a) SDB shall furnish to the Association all such information as the Association shall reasonably request concerning the expenditure of the proceeds of the Credit, Parts A, B (ii), B (iv) and B (v) of the Project, the Investment Enterprises, the Investment Projects, and the sub-loans and investments. (b) SDB shall, at the request of the Association, exchange views with the Association with regard to the progress of Parts A, B (ii), B (iv) and B (v) of the Project, the performance of its obligations under this Agreement and under the Subsidiary Loan Agreement, and other matters relating to the purposes of the Credit. - 10 - (c) SDB shall promptly inform the Association of any condition which interferes or threatens to interfere with, the progress of the Project, the accomplishment of the Credit, or the performance by SDB of its obligations under this Agreement and under the Subsidiary Loan Agreement. Section 2.07. SDB shall duly perform all its obligations under agreements under which funds have been lent or otherwise put at the disposal of SDB by the Borrower or its agencies or others for relending, investment or management. SDB shall promptly inform the Association of any action which would have the effect of assigning, amending, abrogating or waiving any material provision of any such agreement. Section 2.08. If SDB estabishes or acquires any subsidiary, SDB shall cause such subsidiary to observe and perform the obligations of SDB hereunder to the extent to which such obligations shall or can be applicable thereto, as though such obligations were binding upon such subsidiary. Section 2.09. Except as the Association shall otherwise agree, SDB: (i) shall not sell, lease, transfer, encumber, mortgage or otherwise dispose of any of its property or assets, except in the ordinary course of business; and (ii) shall take all - 11 - action necessary to maintain its corporate existence and right to carry on operations and to acquire, maintain and renew all rights, powers, privileges and franchises necessary or useful in the conduct of its business. - 12 - ARTICLE III Financial Covenants Section 3.01. SDB shall maintain records adequate to record the progress of the Project and of each Investment Project (including the cost thereof) and to reflect in accordance with consistently maintained appropriate accounting practices the operations and financial condition of SDB. Section 3.02. SDB shall: (i) have its and its subsidiaries' accounts and financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the end of each such year, (A) certified copies of its and its subsidiaries' financial statements for such year as so audited, and (B) the report of such audit by said auditors, of such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the accounts and financial statements of SDB and its subsidiaries and the audit thereof as the Assocation shall from time to time reasonably request. Section 3.03. Except as the Association shall otherwise agree, SDB shall: (i) conduct its operations and affairs in such - 13- manner as shall be necessary to maintain, at all times, its debt/equity ratio within the limit referred to in Section 3.05 of this Agreement; and (ii) if such ratio shall, for reasons beyond SDB's control, be exceeded, promptly take all such reasonable action as shall be necessary or advisable to bring such ratio within such limit. Section 3.04. SDB shall not make any repayment in advance of maturity in respect of any outstanding debt of SDB which, in the judgment of the Association, will materially affect SDB's ability to meet its financial obligations. Section 3.05. Except as shall be otherwise agreed between the Association and SDB, SDB shall not incur or permit any subsidiary to incur any debt if, after the incurring of such debt, the consolidated debt of SDB and all its subsidiaries then incurred and outstanding would be greater than four times the consolidated capital and surplus of SDB and all its subsidiaries. For the purpose of this Section: (a) The term "debt" means any debt incurred by SDB or any subsidiary maturing more than one year after the date on which it is originally incurred, including debt assumed or guaranteed by SDB or by a subsidiary. - 14 - (b) Wherever reference is made in this Section to the incurring of debt, such reference shall include any modification of the terms of payment of such debt. Debt shall be deemed to be incurred: (i) under a loan contract or agreement (including the Subsidiary Loan Agreement) on the date and to the extent the loan is drawn down pursuant to such loan contract or agreement; and (ii) under a guarantee agreement, on the date the agreement providing for such guarantee has been entered into but only to the extent that the guaranteed debt is outstanding. (c) Whenever in connection with this Section it shall be necessary to value in terms of Somali Shillings debt payable in foreign currency, such valuation shall be made at the prevailing lawful rate of exchange at which such foreign currency is, at the time of such valuation, obtainable by SDB for the purposes of servicing such debt. (d) The term "consolidated debt of SDB and all its subsidiaries" means the total amount of debt of SDB and subsidiaries, excluding any debt owed by SDB to any subsidiary or by any subsidiary to SDB or to any other subsidiary. (e) The term "consolidated capital and surplus of SDB and all its subsidiaries" means the aggregate of the unimpaired paid-in capital, surplus and free reserves of SDB and subsidiaries - 15 - after excluding therefrom such amounts as shall represent equity interests of SDB in any subsidiary or of any subsidiary in SDB or any other subsidiary. Section 3.06. SDB shall not carry risk resulting from changes in the rates of exchange between the currencies (including Somali Shillings) used in its operations. Section 3.07. The Association and SDB shall from time to time, at the request of either party, exchange views through their representatives with regard to the administration, operations and financial condition of SDB and its subsidiaries, and SDB shall furnish to the Association all such information as the Association shall reasonably request concerning the administration, operations and financial condition of SDB and subsidiaries. Section 3.08. SDB shall enable the Association's representatives to inspect the records referred to in Section 3.01 of this Agreement and any relevant documents. - 16 - ARTICLE IV Effective Date; Termination; Cancellation and Suspension Section 4.01. This Agreement shall come into force and effect on the date upon which the Development Credit Agreement becomes effective. Section 4.02. (a) This Agreement and all obligations of the Association and of SDB thereunder shall terminate on the earlier of the following two dates: (i) the date on which the Development Credit Agreement shall terminate in accordance with its terms; or (ii) a date twenty years after the date of this Agreement. (b) If the Development Credit Agreement terminates in accordance with its terms before the date specified in paragraph (a) (ii) of this Section, the Association shall promptly notify SDB of this event. Section 4.03. All the provisions of this Agreement shall continue in full force and effect notwithstanding any cancellation or suspension under the Development Credit Agreement. - 17 - ARTICLE V Miscellaneous Provisions Section 5.01. Any notice or request required or permitted to be given or made under this Agreement and any agreement between the parties contemplated by the Agreement shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand or by mail, telegram, cable, telex or radiogram to the party to which it is required or permitted to be given or made at such party's address here- inafter specified or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are: For the Association: International Development Association 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INDEVAS 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) - 18 - For SDB: Somali Development Bank P.O. Box 1079 Mogadiscio, Somalia Cable address: DEVELOPMENT Mogadiscio Section 5.02. Any action required or permitted to be taken, and any documents required or permitted to be executed, under this Agreement on behalf of SDB may be taken or executed by its President or such other person or persons as the said President shall designate in writing. Section 5.03. SDB shall furnish to the Association sufficient evidence of the authority and the authenticated specimen signature of the person or persons who will, on behalf of SDB, take any action or execute any documents required or permitted to be taken or executed by SDB pursuant to any of the provisions of this Agreement. Section 5.04. This Agreement may be executed in several counterparts, each of which shall be an original, and all collectively but one instrument. - 19 - IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective names in the District of Columbia, United States of America, as of the day and year first above written. INTERNATIONAL DEVELOPMENT ASSOCIATION By /s/ Willi A. Wapenhans Regional Vice President Eastern Africa SOMALI DEVELOPMENT BANK By /s/ Abdullahi Ahmed Addou Authorized Representative